Attached files
Exhibit
99.5
To the Limited
Partners of
Waypoint Master Fund L.P.
Waypoint Master Fund L.P.
To the best of the knowledge and belief of the undersigned, the
information contained herein is accurate and complete.
By: | Walter Davis |
President and Director
Ceres Managed Futures LLC
General Partner,
Waypoint Master Fund L.P.
Ceres Managed Futures LLC
522 Fifth Avenue
14th Floor
New York, N.Y. 10036
212-296-1999
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Waypoint Master Fund L.P.:
Waypoint Master Fund L.P.:
We have audited the accompanying statement of financial condition of Waypoint Master Fund L.P. (the
Partnership), including the condensed schedule of investments, as of December 31, 2010, and the
related statements of income and expenses, and changes in partners capital for the period March 1,
2010 (commencement of trading operations) to December 31, 2010. These financial statements are the
responsibility of the Partnerships management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Partnership is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Partnerships internal control over financial reporting. Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial
position of Waypoint Master Fund L.P. as of December 31, 2010, and the results of its operations
and its changes in partners capital for the period March 1, 2010 (commencement of trading
operations) to December 31, 2010, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 23, 2011
New York, New York
March 23, 2011
Waypoint Master
Fund L.P.
Statement of Financial Condition
December 31, 2010
Statement of Financial Condition
December 31, 2010
2010 | ||||
Assets:
|
||||
Equity in trading account:
|
||||
Cash
|
$ | 37,616,481 | ||
Cash margin
|
2,729,347 | |||
Net unrealized appreciation on open futures contracts
|
491,759 | |||
Net unrealized appreciation on open forward contracts
|
469,389 | |||
Total assets
|
$ | 41,306,976 | ||
Liabilities and Partners Capital:
|
||||
Liabilities:
|
||||
Accrued expenses:
|
||||
Professional fees
|
$ | 59,330 | ||
Total liabilities
|
59,330 | |||
Partners Capital:
|
||||
General Partner, 0.0000 unit equivalents at
December 31, 2010
|
| |||
Limited Partners, 34,095.6706 Redeemable Units outstanding at
December 31, 2010
|
41,247,646 | |||
$ | 41,306,976 | |||
Net asset value per unit
|
$ | 1,209.76 | ||
See accompanying notes to financial statements.
Waypoint Master
Fund L.P.
Condensed Schedule of Investments
December 31, 2010
Condensed Schedule of Investments
December 31, 2010
Notional($)/ |
||||||||||||
Number of |
% of Partners |
|||||||||||
Contracts | Fair Value | Capital | ||||||||||
Futures Contracts Purchased
|
||||||||||||
Currencies
|
339 | $ | 467,727 | 1.13 | % | |||||||
Indices
|
117 | (24,968 | ) | (0.06 | ) | |||||||
Metals
|
17 | 138,125 | 0.34 | |||||||||
Total futures contracts purchased
|
580,884 | 1.41 | ||||||||||
Futures Contracts Sold
|
||||||||||||
Currencies
|
115 | (89,125 | ) | (0.22 | ) | |||||||
Total futures contracts sold
|
(89,125 | ) | (0.22 | ) | ||||||||
Unrealized Appreciation on Open Forward Contracts
|
||||||||||||
Currencies
|
$ | 17,616,506 | 469,389 | 1.14 | ||||||||
Net unrealized appreciation on open forward contracts
|
469,389 | 1.14 | ||||||||||
Total fair value
|
$ | 961,148 | 2.33 | % | ||||||||
See accompanying notes to financial statements.
Waypoint Master
Fund L.P.
Statement of Income and Expenses
for the period March 1, 2010
(commencement of trading operations)
to December 31, 2010
Statement of Income and Expenses
for the period March 1, 2010
(commencement of trading operations)
to December 31, 2010
2010 | ||||
Income:
|
||||
Net gains (losses) on trading of commodity interests:
|
||||
Net realized gains (losses) on closed contracts
|
$ | 6,918,626 | ||
Change in net unrealized gains (losses) on open contracts
|
961,148 | |||
Gain (loss) from trading, net
|
7,879,774 | |||
Interest income
|
38,451 | |||
Total income (loss)
|
7,918,225 | |||
Expenses:
|
||||
Clearing fees
|
106,133 | |||
Professional fees
|
65,600 | |||
Total expenses
|
171,733 | |||
Net income (loss)
|
$ | 7,746,492 | ||
Net income (loss) per unit (Note 6)
|
$ | 210.83 | ||
Weighted average units outstanding
|
36,640.3589 | |||
See accompanying notes to financial statements.
Waypoint Master
Fund L.P.
Statement of Changes in Partners Capital
for the period March 1, 2010
(commencement of trading operations)
to December 31, 2010
Statement of Changes in Partners Capital
for the period March 1, 2010
(commencement of trading operations)
to December 31, 2010
Partners |
||||
Capital | ||||
Initial capital contributions from Limited Partners at
March 1, 2010 representing 37,516.8526 Redeemable Units
|
$ | 37,516,853 | ||
Net income (loss)
|
7,746,492 | |||
Subscriptions of 4,964.8457 Redeemable Units
|
5,652,674 | |||
Redemptions of 8,386.0277 Redeemable Units
|
(9,629,922 | ) | ||
Distribution of interest income to feeder funds
|
(38,451 | ) | ||
Partners Capital at December 31, 2010
|
$ | 41,247,646 | ||
Net asset value per unit:
2010:
|
$ | 1,209.76 | ||
See accompanying notes to financial statements.
Waypoint Master
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
1. | Partnership Organization: |
Waypoint Master Fund L.P. (the Master) is a
limited partnership organized under the partnership laws of the
State of New York on February 19, 2010, to engage in the
speculative trading of a diversified portfolio of commodity
interests, including futures contracts, options, swaps and
forward contracts. The sectors traded include currencies,
energy, grains, indices, U.S. and non-U.S. interest rates,
livestock, lumber, metals and softs. The commodity interests
that are traded by the Master are volatile and involve a high
degree of market risk. The Master is authorized to sell an
unlimited number of redeemable units of limited partnership
interest (Redeemable Units).
Ceres Managed Futures LLC, a Delaware limited liability company,
acts as the general partner (the General Partner)
and commodity pool operator of the Master. The General Partner
is wholly owned by Morgan Stanley Smith Barney Holdings LLC
(MSSB Holdings). Morgan Stanley, indirectly through
various subsidiaries, owns a majority equity interest in MSSB
Holdings. Citigroup Global Markets Inc. (CGM), the
commodity broker for the Master, owns a minority equity interest
in MSSB Holdings. Citigroup Inc. (Citigroup),
indirectly through various subsidiaries, wholly owns CGM. As of
December 31, 2010 all trading decisions for the Master are
made by the Advisor (defined below).
On March 1, 2010 (commencement of trading operations),
Diversified 2000 Futures Fund L.P. (Diversified
2000), Global Diversified Futures
Fund L.P.(Global Diversified), and Emerging CTA
Portfolio L.P. (Emerging CTA) each allocated a
portion of their capital to the Master. Diversified 2000
purchased 5,975.7506 Redeemable Units with cash equal to
$5,975,751, Global Diversified purchased 4,959.4220 Redeemable
Units with cash equal to $4,959,422 and Emerging CTA purchased
26,581.6800 Redeemable Units with cash equal to $26,581,680. The
Master was formed to permit commodity pools managed now or in
the future by Waypoint Capital Management LLC (the
Advisor) using the Diversified Futures Program, the
Advisors proprietary, systematic trading system, to invest
together in one trading vehicle.
The Master operates under a structure where its investors
consist of Diversified 2000, Global Diversified and
Emerging CTA (each a Feeder, collectively the
Funds), each of which owned approximately 30.8%,
17.2% and 52.0% investments in the Master at December 31,
2010, respectively.
The Master will be liquidated upon the first to occur of the
following: December 31, 2030; or under certain other
circumstances as defined in the Limited Partnership Agreement of
the Master (the Limited Partnership Agreement).
2. | Accounting Policies: |
a. | Use of Estimates. The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates. | |
b. | Statement of Cash Flows. The Master is not required to provide a Statement of Cash Flows. | |
c. | Masters Investments. All commodity interests of the Master (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statement of |
Waypoint Master
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Financial Condition. Realized gains or losses and any change in net unrealized gains or losses are included in the Statement of Income and Expenses. |
Masters Fair Value Measurements. Fair
value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date under
current market conditions. The fair value hierarchy gives the
highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the
lowest priority to fair values derived from unobservable inputs
(Level 3). The level in the fair value hierarchy within
which the fair value measurement in its entirety falls shall be
determined based on the lowest level input that is significant
to the fair value measurement in its entirety. Management has
concluded that based on available information in the
marketplace, the Masters Level 1 assets and
liabilities are actively traded.
GAAP also requires the need to use judgment in determining if a
formerly active market has become inactive and in determining
fair values when the market has become inactive. Management has
concluded that based on available information in the
marketplace, there has not been a significant decrease in the
volume and level of activity in the Masters Level 2
assets and liabilities.
The Master will separately present purchases, sales, issuances,
and settlements in their reconciliation of Level 3 fair value
measurements (i.e. to present such items on a gross basis rather
than on a net basis), and makes disclosures regarding the level
of disaggregation and the inputs and valuation techniques used
to measure fair value for measurements that fall within either
Level 2 or Level 3 of the fair value hierarchy as
required under GAAP.
The Master considers prices for exchange-traded commodity
futures, forwards and options contracts to be based on
unadjusted quoted prices in active markets for identical assets
(Level 1). The values of non exchange-traded forwards,
swaps and certain options contracts for which market quotations
are not readily available are priced by broker-dealers that
derive fair values for those assets from observable inputs
(Level 2). As of and for the period ended December 31,
2010, the Master did not hold any derivative instruments that
are priced at fair value using unobservable inputs through the
application of managements assumptions and internal
valuation pricing models (Level 3). The gross presentation
of the fair value of the Masters derivatives by instrument
type is shown in Note 4, Trading Activities.
Quoted Prices in |
||||||||||||||||
Active Markets |
Significant Other |
Significant |
||||||||||||||
for Identical |
Observable Inputs |
Unobservable |
||||||||||||||
12/31/2010 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets
|
||||||||||||||||
Futures
|
$ | 491,759 | $ | 491,759 | $ | | $ | | ||||||||
Forwards
|
469,389 | | 469,389 | | ||||||||||||
Total assets
|
961,148 | 491,759 | 469,389 | | ||||||||||||
Total fair value
|
$ | 961,148 | $ | 491,759 | $ | 469,389 | $ | | ||||||||
d. | Futures Contracts. The Master trades futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (variation margin) may be made or received by the Master each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Master. When the contract is closed, the Master records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial |
Waypoint Master
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Realized gains (losses) and changes in unrealized gains (losses) on futures contracts are included in the Statement of Income and Expenses. |
e. | Forward Foreign Currency Contracts. Foreign currency contracts are those contracts where the Master agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Foreign currency contracts are valued daily, and the Masters net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Financial Condition. Realized gains (losses) and changes in unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Statements of Income and Expenses. |
The Master does not isolate that portion of the results of
operations arising from the effect of changes in foreign
exchange rates on investments from fluctuations from changes in
market prices of investments held. Such fluctuations are
included in net gain (loss) on investments in the Statements of
Income and Expenses.
f. | Income and Expenses Recognition. All of the income and expenses and realized and unrealized gains and losses on trading of commodity interests are determined on each valuation day and allocated pro rata among the Funds at the time of such determination. |
g. | Income Taxes. Income taxes have not been provided as each partner is individually liable for the taxes, if any, on its share of the Masters income and expenses. |
GAAP provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial
statements and requires the evaluation of tax positions taken or
expected to be taken in the course of preparing the
Masters financial statements to determine whether the tax
positions are more-likely-than-not to be sustained
by the applicable tax authority. Tax positions with respect to
tax at the Master level not deemed to meet the
more-likely-than-not threshold would be recorded as
a tax benefit or expense in the current year. The General
Partner has concluded that no provision for income tax is
required in the Masters financial statements.
The Master files U.S. federal and various state and local
tax returns. No income tax returns are currently under
examination. Generally, the 2010 tax year remains subject to
examination by U.S. federal and most state tax authorities.
Management does not believe that there are any uncertain tax
positions that require recognition of a tax liability.
h. | Subsequent Events. Management of the Master evaluates events that occur after the balance sheet date but before financial statements are filed. Management has assessed the subsequent events through the date of filing and determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements. | |
i. | Net Income (Loss) per Unit. Net income (loss) per unit is calculated in accordance with investment company guidance. See Note 6, Financial Highlights. |
3. | Agreements: |
a. | Limited Partnership Agreement: |
The General Partner administers the business and affairs of the
Master, including selecting one or more advisors to make trading
decisions for the Master.
Waypoint Master
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
b. | Management Agreement: |
The General Partner, on behalf of the Master, has entered into a
management agreement (the Management Agreement) with
the Advisor, a registered commodity trading advisor. The Advisor
is not affiliated with the General Partner or CGM and is not
responsible for the organization or operation of the Master. The
Management Agreement provides that the Advisor has sole
discretion in determining the investment of the assets of the
Master. All management fees in connection with the Management
Agreement are borne by the Funds. The Management Agreement may
be terminated upon notice by either party.
c. | Customer Agreement: |
The Master has entered into a customer agreement (the
Customer Agreement) with CGM whereby CGM provides
services which include, among other things, the execution of
transactions for the Masters account in accordance with
orders placed by the Advisor. All exchange, clearing, user,
give-up,
floor brokerage and National Futures Association fees
(collectively the clearing fees) are borne by the
Master. All other fees including CGMs direct brokerage
fees shall be borne by the Funds. All of the Masters
assets are deposited in the Masters account at CGM. The
Masters cash is deposited by CGM in segregated bank
accounts to the extent required by Commodity Futures Trading
Commission regulations. At December 31, 2010, the amounts
of cash held by the Master for margin requirements was
$2,729,347. The Customer Agreement may be terminated upon notice
by either party.
4. | Trading Activities: |
The Master was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial
instruments and derivative commodity interests. The results of
the Masters trading activities are shown in the Statement
of Income and Expenses.
The Customer Agreement between the Master and CGM gives the
Master the legal right to net unrealized gains and losses on
open futures and forwards contracts. The Master nets, for
financial reporting purposes, the unrealized gains and losses on
open futures and forward contracts on the Statement of Financial
Condition.
All of the commodity interests owned by the Master are held for
trading purposes. The average number of futures contracts traded
for the period ended December 31, 2010 based on a monthly
calculation, was 1,813. The average notional value of currency
forward contracts for the period ended December 31, 2010
based on a monthly calculation, was $90,699,947.
Waypoint Master
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
The following table indicates the gross fair values of
derivative instruments of futures and forward contracts as
separate assets and liabilities as of December 31, 2010.
December 31, |
||||
Assets
|
2010 | |||
Futures Contracts
|
||||
Currencies
|
$ | 467,727 | ||
Indices
|
15,375 | |||
Metals
|
138,125 | |||
Total unrealized appreciation on open futures contracts
|
$ | 621,227 | ||
Liabilities
|
||||
Futures Contracts
|
||||
Currencies
|
$ | (89,125 | ) | |
Indices
|
(40,343 | ) | ||
Total unrealized depreciation on open futures contracts
|
$ | (129,468 | ) | |
Net unrealized appreciation on open futures contracts
|
$ | 491,759 | * | |
Assets
|
||||
Forward Contracts
|
||||
Currencies
|
$ | 469,389 | ||
Net unrealized appreciation on open forward contracts
|
$ | 469,389 | ** | |
* | This amount is in Net unrealized appreciation on open futures contracts on the Statement of Financial Condition. | |
** | This amount is in Net unrealized appreciation on open forward contracts on the Statement of Financial Condition. |
The following table indicates the trading gains and losses, by
market sector, on derivative instruments for the period ended
December 31, 2010.
December 31, 2010 |
||||
Sector
|
Gain (loss) from trading | |||
Currencies
|
$ | 3,563,092 | ||
Energy
|
478,070 | |||
Grains
|
(218,525 | ) | ||
Indices
|
1,231,413 | |||
Interest Rates U.S.
|
2,042,946 | |||
Interest Rates Non-U.S.
|
593,149 | |||
Metals
|
392,965 | |||
Softs
|
(203,336 | ) | ||
Total
|
$ | 7,879,774 | *** | |
*** | This amount is in Gain (loss) from trading, net on the Statement of Income and Expenses. |
5. | Subscriptions, Distributions and Redemptions: |
Subscriptions are accepted monthly from investors and they
become limited partners on the first day of the month after
their subscription is processed. A limited partner may withdraw
all or part of their capital contribution and undistributed
profits, if any, from the Master in multiples of the net asset
value per Redeemable Unit as of the end of any day (the
Redemption Date) after a request for redemption
has been made to the General Partner at least 3 days
in advance of the Redemption Date. The Redeemable Units are
classified as a liability when the limited partner elects to
redeem and informs the Master.
Waypoint Master
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
6. | Financial Highlights: |
Changes in the net asset value per unit for the period from
March 1, 2010 (commencement of trading operations) to
December 31, 2010 was as follows:
2010 | ||||
Net realized and unrealized gains (losses)*
|
$ | 211.61 | ||
Interest income
|
1.07 | |||
Expenses**
|
(1.85 | ) | ||
Increase (decrease) for the period
|
210.83 | |||
Distribution of interest income to feeder funds
|
(1.07 | ) | ||
Net asset value per unit beginning of period
|
1,000.00 | |||
Net asset value per unit, end of period
|
$ | 1,209.76 | ||
* | Includes clearing fees. | |
** | Excludes clearing fees. |
2010 | ||||
Ratios to average net assets:
|
||||
Net investment income (loss)***
|
(0.4 | )%**** | ||
Operating expenses
|
0.5 | %**** | ||
Total return
|
21.1 | % | ||
*** | Interest income less total expenses. | |
**** | Annualized |
The above ratios may vary for individual investors based on the
timing of capital transactions during the period. Additionally,
these ratios are calculated for the limited partner class using
the limited partners share of income, expenses and average
net assets.
7. | Financial Instrument Risks: |
In the normal course of business, the Master is party to
financial instruments with off-balance sheet risk, including
derivative financial instruments and derivative commodity
instruments. These financial instruments may include forwards,
futures, options and swaps whose values are based upon an
underlying asset, index, or reference rate, and generally
represent future commitments to exchange currencies or cash
balances, to purchase or sell other financial instruments at
specific terms at specified future dates, or, in the case of
derivative commodity instruments, to have a reasonable
possibility to be settled in cash, through physical delivery or
with another financial instrument. These instruments may be
traded on an exchange or over-the-counter (OTC).
Exchange-traded instruments are standardized and include futures
and certain forwards and option contracts. OTC contracts are
negotiated between contracting parties and include certain
forwards and option contracts. Each of these instruments is
subject to various risks similar to those related to the
underlying financial instruments including market and credit
risk. In general, the risks associated with OTC contracts are
greater than those associated with exchange-traded instruments
because of the greater risk of default by the counterparty to an
OTC contract.
Market risk is the potential for changes in the value of the
financial instruments traded by the Master due to market
changes, including interest and foreign exchange rate movements
and fluctuations in commodity or security prices. Market risk is
directly impacted by the volatility and liquidity in the markets
in which the related underlying assets are traded. The Master is
exposed to a market risk equal to the value of futures and
forward contracts purchased and unlimited liability on such
contracts sold short.
Credit risk is the possibility that a loss may occur due to the
failure of a counterparty to perform according to the terms of a
contract. The Masters risk of loss in the event of
counterparty default is typically limited to the amounts
recognized in the Statement of Financial Condition and not
represented by the
Waypoint Master
Fund L.P.
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
contract or notional amounts of the instruments. The
Masters risk of loss is reduced through the use of legally
enforceable master netting agreements with counterparties that
permit the Master to offset unrealized gains and losses and
other assets and liabilities with such counterparties upon the
occurrence of certain events. The Master has credit risk and
concentration risk as the sole counterparty or broker with
respect to the Masters assets is CGM or a CGM affiliate.
Credit risk with respect to exchange-traded instruments is
reduced to the extent that through CGM, the Masters
counterparty is an exchange or clearing organization.
The General Partner monitors and attempts to control the
Masters risk exposure on a daily basis through financial,
credit and risk management monitoring systems and accordingly,
believes that it has effective procedures for evaluating and
limiting the credit and market risks to which the Master may be
subject. These monitoring systems generally allow the General
Partner to analyze statistically actual trading results with
risk-adjusted performance indicators and correlation statistics.
In addition, on line monitoring systems provide account analysis
of futures, forwards and options positions by sector, margin
requirements, gain and loss transactions and collateral
positions.
The majority of these instruments mature within one year of the
inception date. However, due to the nature of the Masters
business, these instruments may not be held to maturity.